Small Business, Enterprise and Employment Bill

Chris Evans Excerpts

Wednesday 16th July 2014 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

It is indeed a pleasure to follow the hon. Member for Gosport (Caroline Dinenage). It is a great thing that we are debating small businesses, which are at the heart of British life. From the cornershop to the village pub, business and free enterprise are at the heart of the British way of life. From the Marks & Spencer penny bazaar, we have seen so many businesses grow from small roots. I am concerned, however, that there are still several anti-small business practices and broken markets where an active Government taking the side of small business could make a real difference and a real change.

If I were to open up my postbag and draw out the top three things that small businesses write to me about, the first would be procurement. Smaller firms find it difficult to procure larger contracts that could be vital to the future of their business. The second and perhaps the most important and the most dangerous is tackling the scourge of late payments. Finally, many of my constituents love their pub and are afraid that it is disappearing off the high street.

Speaking as someone who comes from the betting industry, I can say that we have seen the decimation of small, independent betting shops. They were once a common sight on the high streets of Britain, but they have all but disappeared as a result of massive change. I am fearful that the same thing is happening to the pubs. There is no sadder sight than seeing boarded up a pub in which people enjoyed their youth and perhaps their first pint, or where they joined their first football or pool team. It is sad when such a pub has no future. We must address this real problem now. Some 27 pubs a week have been closed since 2010. Many people are not interested in the big pub companies, but they like their local, along with their local landlord or landlady. These are the ones that keep the sports teams going, whether it be pool, darts, football, rubgy or cricket. They are often places where people meet, discuss tactics and enjoy a pint afterwards.

I am not going to make sweeping statements about pubcos. That is sometimes a problem with us politicians: we have a habit of making sweeping statements. However, I am deeply concerned about the position of pubs. Many industry stakeholders are not profiteering from the opportunities made available by the terms of tied pub contracts, and I welcome the introduction of regulation in principle as a platform for meaningful and material reforms. However, I have grave concerns about the weakness of the Government’s proposals. I fear that they will cause further detriment to the nation’s pubs by encouraging pub companies to accelerate what many consider to be their asset-stripping programme of disposal of pubs for alternative use.

The fundamental problem faced by tenants is the charging of excessive rents that do not reflect the over-inflated prices of tied products. I urge the Government to accept that, if we are to have meaningful reforms, a market-rent-only option would offer a genuine remedy should a pub-owning company act inappropriately, and a clear, tangible power for the adjudicator for whom the Bill provides would render unfair lease or tenancy provisions unenforceable.

I also want to say something about late payments in the short time that is available to me. The Bill empowers the Secretary of State to require businesses to publish their payment records in order to increase transparency, but gives no indication of when that will be done. It does nothing to shift the burden from small businesses which have to complain about their large-scale customers. The Bill also provides for action to make public sector bodies pay more quickly. I welcome that, but, according to statistics that I have seen, 77% of members of the Federation of Small Businesses have said that private sector organisations are more likely to make late payments. Late payments are a moral issue. What is lacking is an unambiguous statement from the Government that this is an anti-business practice which must be stamped out. I call on them to take strict action.

I should have liked to develop my argument further, but perhaps I talked about pubs too much. Let me end by drawing attention to the difficulty that small businesses experience with procurement. Many complain to me that the process is unfair, time-consuming and costly. I think that there should be a way of simplifying it so that businesses can compete for both Government and private sector procurement contracts.

As I have said, I should have liked to develop my argument further, but I look forward to the Government’s response.

--- Later in debate ---

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Small businesses are the powerhouse of the economy, contributing 46% of the UK’s annual income in the private sector. If we are to have a sustained economic recovery, it will be built on the backs of small businesses. I support the principles of the Bill, although it has been late in coming, but I have some concerns about the detail.

I want to refer in particular to the late payments provisions. As has been mentioned, I have had a campaign on this, stemming from a local issue, for the last three years. A local haulier came to me and said his business was going out of business as a result of late payments. That opened a whole can of worms. Small businesses do not want to go public about late payments because of the possibility of retribution. This all culminated in a Radio 5 Live phone-in programme on late payments last November, which had the highest ever recorded response.

That shows the scale of the issue, and it is hardly surprising. We know from BACS—bankers automated clearing services—data that £46.1 billion is currently owed in late payments. That affects not only productivity—158 million hours have been spent chasing overdue bills—but also access to finance and the terms of that finance. The Forum of Private Business estimates that in 2012 it put out of business 124,000 businesses, so it is a huge issue, not just in the private sector, although it is more predominant there, but in the public sector, as was reported on the “File on 4” programme last week.

My hon. Friend the Member for Streatham (Mr Umunna) mentioned the inquiry I held last year, involving people from across the House. Its fundamental finding was that late payments reflect the culture of a company, which is ultimately down to the company’s leadership. Late payments are a form of corporate bullying, because large companies are able to exert their power over small companies.

[Chris Evans]

I am listening to what my hon. Friend has to say, because she speaks from a position of great knowledge. What advice would she give small companies that find themselves in an unequal position where they cannot get the payment out of a larger company, which can bully them? What would she say to them?

[Debbie Abrahams]

I would say that the measures in the Bill are not enough. There is a power imbalance between the large companies and the small companies, and late payment needs to be seen as unacceptable as tax evasion.

The Government’s proposals to remedy the situation are disappointing. They have taken up a number of recommendations from my inquiry, but those have been very watered down. For example, clause 1 fails to describe how the prompt payment code will be updated. As we have heard, the code is already being abused by a number of prominent large companies, so, without that detail, it is legless. Similarly, the Government have reneged on their promise made last December to introduce 30-day payment terms throughout the public procurement supply chain. Instead, clause 3 states that regulations “may” be introduced to require large companies regularly to publish information about their payment practices. That is very disappointing indeed.

Another example is the Government’s failure to reform the pre-qualification procedures for public sector contracts, which have been estimated to cost the construction industry alone more than £1 billion annually. One of my recommendations on the pre-qualification questionnaire was that there should be regular updates on the past payment performance of such companies, but such a provision has been omitted. Article 7 of the EU directive on late payment, which protects small businesses and allows them to maintain their anonymity when challenging grossly unfair practices, has still not been implemented. The mystery shopper scheme in clause 34, which allows small businesses to complain about poor practices, including late payments, does nothing to address the climate of fear in reporting these events. This is not good enough; it really does not go far enough. The fundamental point I made earlier about the bullying culture and the power imbalance has not been addressed at all in the Bill.